<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
---
For the quarterly period ended December 31, 1994.
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________.
Commission file number 05734
-----
Pioneer-Standard Electronics, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0907152
- - - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 East 131st Street, Cleveland, OH 44105
- - - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 587-3600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Shares, as of the latest practical date: COMMON SHARES, WITHOUT PAR
VALUE, AS OF FEBRUARY 8, 1995: 14,913,346.
<PAGE> 2
<TABLE>
PART I - FINANCIAL INFORMATION
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
December 31, 1994 March 31, 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash $ 14,581 $ 5,954
Accounts receivable - net 113,892 81,155
Merchandise inventory 131,405 85,754
Prepaid expenses 1,661 919
Deferred income taxes 5,511 4,391
-------- --------
Total current assets 267,050 178,173
Investment in 50% - owned company 15,329 14,463
Other assets 5,353 1,831
Property and equipment, at cost 51,587 45,817
Accumulated depreciation 23,000 20,245
-------- --------
Net 28,587 25,572
-------- --------
$316,319 $220,039
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 4,500 $ 2,000
Accounts payable 110,088 68,585
Accrued liabilities 20,952 19,400
Long-term debt due within
one year 2,970 3,056
-------- --------
Total current liabilities 138,510 93,041
Long-term debt 56,306 22,272
Deferred income taxes 2,038 1,986
Shareholders' equity
Common stock, at stated value 6,667 6,609
Capital in excess of stated value 16,323 15,806
Retained earnings 96,829 80,325
Currency translation adjustments (354) -
-------- --------
Total shareholders' equity 119,465 102,740
-------- --------
$316,319 $220,039
======== ========
<FN>
See accompanying notes.
</TABLE>
2
<PAGE> 3
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Quarter ended Nine months ended
December 31, December 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $212,433 $149,814 $590,688 $421,601
Costs and expenses:
Cost of goods sold 173,841 120,807 479,508 337,159
Warehouse, selling and
administrative expense 26,959 20,627 79,396 62,067
------- ------- -------- --------
Operating profit 11,633 8,380 31,784 22,375
Interest expense 1,041 662 2,686 2,013
Currency transaction loss 131 --- 131 ---
Equity in earnings of
50%-owned company 9 404 865 2,350
------- ------- -------- --------
Income before income taxes 10,470 8,122 29,832 22,712
Provision for income taxes 4,340 3,235 12,088 8,566
------- ------- -------- --------
Net income $ 6,130 $ 4,887 $ 17,744 $ 14,146
======= ======= ======== ========
Average shares outstanding 15,262,621 15,150,532 15,252,844 15,084,822
Shares outstanding at end of period 14,913,346 14,721,673 14,913,346 14,721,673
Earnings per share $.40 $.32 $1.16 $.94
Dividends per share $.03 $.023 $.083 $.063
<FN>
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Nine months ended
December 31,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $17,744 $14,146
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,749 4,164
Undistributed earnings of affiliate (865) (2,350)
Increase in operating working capital (28,594) (22,218)
Increase in other assets (1,460) (67)
Deferred taxes (1,077) (426)
------- -------
Total adjustments (27,247) (20,897)
------- -------
Net cash used in
operating activities (9,503) (6,751)
Cash flows from investing activities:
Acquisition of business (10,068) ---
Additions to property and equipment (7,523) (4,736)
------- ------
Net cash used in investing activities (17,591) (4,736)
Cash flows from financing activities:
Increase in short-term financing 2,500 2,500
Increase in revolving credit borrowings 42,000 25,000
Decrease of revolving credit borrowings (5,000) (15,000)
Decrease in other long-term
debt obligations (3,052) (260)
Issuance of common shares under company
stock option plan 575 176
Dividends paid (1,240) (930)
------- ------
Net cash provided by financing activities 35,783 11,486
Effect of exchange rate changes on cash (62) ---
------- ------
Net increase (decrease) in cash 8,627 (1)
Cash at beginning of period 5,954 1,864
------- ------
Cash at end of period $14,581 $1,863
======= ======
<FN>
See accompanying notes.
</TABLE>
4
<PAGE> 5
NOTES - Pioneer-Standard Electronics, Inc.
1. PER SHARE DATA
Net income per common share is computed using the weighted average common
shares and common share equivalents outstanding during the quarters and
nine-month periods ended December 31, 1994 and 1993. Common share equivalents
consist of shares exercisable for stock options computed by using the treasury
stock method.
2. STOCK SPLIT
On June 23, 1994, the Board of Directors declared a three-for-two stock split
effected in the form of a 50% share dividend of the Company's common shares
payable August 1, 1994 to shareholders of record July 6, 1994. The share and
per share data have been restated for the periods presented to reflect the
stock split.
3. ACQUISITION
On June 1, 1994, the Company acquired certain of the assets of the Zentronics
Division of Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian
corporation and assumed certain of Westburne's liabilities for a purchase price
of $13.9 million Cdn. (approximately $10.1 million U.S.). The acquisition does
not meet the significant subsidiary tests as defined in Rule 3-05 of Regulation
S-X and the impact on the Company's operations was not significant.
4. MANAGEMENT OPINION
The information furnished herein reflects all normal and recurring adjustments
which are, in the opinion of management, necessary to provide a fair statement
of the results of operations for the quarters and nine months ended December
31, 1994 and 1993. The results of operations for the three and nine month
periods are not necessarily indicative of results which may be expected for a
full year.
5
<PAGE> 6
PIONEER-STANDARD ELECTRONICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION
On June 1, 1994, the Company acquired certain of the assets of the Zentronics
Division of Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian
corporation and assumed certain of Westburne's liabilities. The transaction
was completed by Pioneer-Standard Canada Inc., a newly-formed Canadian
subsidiary of the Company by payment of an aggregate of approximately $13.9
million Cdn. (approximately $10.1 million U.S.) to Westburne.
Current assets increased by $88.9 million and current liabilities increased by
$45.5 million during the nine-month period ended December 31, 1994, resulting
in an increase of $43.4 million of working capital. The current ratio was
1.9:1 at December 31, 1994 and at year-end, March 31, 1994.
During the first nine months of the current year, total interest-bearing debt
increased by $36.4 million. The ratio of interest-bearing debt to
capitalization was 35% at December 31, 1994 compared with 21% at March 31,
1994. The increase in financing requirements is attributable to the working
capital needs arising from increased sales volume and the investment in the
Zentronics business described above. The most recent nine-month sales are up
26% (excluding Zentronics current year sales) from the trailing fiscal
nine-month sales volume.
Effective October 28, 1994, the Company amended its Credit Agreement with three
banks to increase the credit lines available to the Company. This amendment
provides for an increase in borrowings from $35.0 million to $45.0 million and
allows for an increase in the maximum short-term borrowings outside of the
Credit Agreement to be outstanding at any one time from $15.0 million to $20.0
million. In addition, pursuant to provisions of the Credit Agreement and upon
consent of the parties thereto, the maturity date of the facility was extended
for one additional year, resulting in a $45.0 million revolving credit facility
with a maturity date of January 1, 1998, followed by a four-year term loan
amortized in equal quarterly installments. As of December 31, 1994, Credit
Agreement borrowings were $41.0 million and short-term borrowings outside of
the Credit Agreement were $4.5 million.
Management estimates that capital spending plans relating to ongoing
initiatives designed to improve efficiencies through computer enhancement of
operating processes, as well as meeting normal expansion needs of the business
for the current year, will approximate $10.0 million ($7.5 million was expended
in the first nine months of the current year). Under present business
conditions, it is anticipated that funds from current operations and available
debt facilities will be sufficient to finance both capital spending and working
capital needs for the balance of the current fiscal year.
6
<PAGE> 7
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1994 COMPARED WITH
THE NINE MONTHS ENDED DECEMBER 31, 1993
Net sales for the nine-month period ended December 31, 1994 of $590.7 million
were 40% greater than sales of the prior year nine-month period of $421.6
million. The increase in sales reflects continuing strong demand for
electronic components and computer systems and, in addition, sales of the
newly-acquired Zentronics business accounted for 7% of this increase. During
the first nine months of 1994, semiconductor products accounted for 38% of the
Company's sales compared with 41% in the prior year. Computer systems products
accounted for 38% of sales in 1994 and 34% in 1993. Passive and
electromechanical products accounted for 22% of sales in 1994 and 23% in 1993.
Miscellaneous products accounted for 2% of sales in both 1994 and 1993.
The percentage increase in cost of goods sold of 42% resulted in a gross margin
of 18.8% in the first nine months of the current year compared with 20.0% a
year ago. A major factor for the reduced gross margin percent in 1994 compared
with the prior period is attributable to the incremental increase in sales
volume of microprocessors earning relatively lower gross profit margins which
are marketed through an efficient, low-cost sales channel.
Warehouse, selling and administrative expenses of $79.4 million increased by
28% as compared with the $62.1 million incurred during the prior year
nine-month period. This resulted in a ratio of these expenses to sales of
13.4% for the 1994 period compared with 14.7% for the 1993 first nine months.
The resulting operating profit of $31.8 million in 1994 was 5.4% of sales
compared with $22.4 million in 1993 which was 5.3% of sales. Current year
results reflect the increase in sales and effective cost containment.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $865,000 for the 1994 nine-month period compared
with $2,350,000 for the same period last year; net sales of the affiliate for
the current year period of $271.1 million were 18% less than the sales of the
prior year period of $329.4 million. The net sales reduction is attributable
to a lower volume of microprocessor sales which earn a relatively low gross
profit margin. The lower microprocessor sales and increased operating expenses
impacted current year profitability. Notwithstanding the reduced sales level
for the current nine month period, a significant portion of the affiliate's
sales during the nine-month period was attributable to highly concentrated
sales of certain microprocessors in large quantities, the sales volume of which
might not be sustainable in future periods and the effect of which could result
in a significant impact on net income of the affiliate.
The effective tax rate for the current nine-month period was 41.7% of income
before the Company's equity in its affiliate's earnings, compared with 42.1% a
year ago; these effective tax rates include .2% and .8% for deferred taxes on
the unremitted earnings of the affiliate for 1994 and 1993.
Primarily as a result of the factors noted above, the Company's net income for
the nine-month period ending December 31, 1994 of $17.7 million was $3.6
million higher than the $14.1 million earned a year ago.
7
<PAGE> 8
THREE MONTHS ENDED DECEMBER 31, 1994 COMPARED WITH
THE THREE MONTHS ENDED DECEMBER 31, 1993
Net sales for the three-month period ended December 31, 1994 of $212.4 million
increased 42% over sales of the prior year three-month period of $149.8
million. The increase in sales reflects continuing strong demand for
electronic components and computer and peripheral products, especially for
those products tied to the rapidly growing personal computer industry. In
addition, sales of the newly-acquired Zentronics business accounted for
approximately 9% of this increase. Semiconductor products accounted for 38% of
the Company's sales during the third fiscal quarter compared with 44% in the
comparable quarter a year ago. Computer systems products were 39% during the
quarter compared with 33% a year ago. Passive and electromechanical products
were 21% during both quarters. Miscellaneous products accounted for 2% of
sales in both 1994 and 1993.
The percentage increase in cost of goods sold of 44% resulted in a gross margin
of 18.2% in the third quarter of the current year compared with 19.4% a year
ago. A contributing factor for the reduced gross margin percent in 1994
compared with the prior period is attributable to the incremental increase in
sales volume of microprocessors earning relatively lower gross profit margins
which are marketed through an efficient low cost sales channel.
Warehouse, selling and administrative expenses of $27.0 million increased by
31% over the $20.6 million incurred during the prior year three-month period.
This resulted in a ratio of these expenses to sales of 12.7% for the 1994
period compared with 13.8% for the 1993 quarter.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $9,000 for the 1994 three-month period compared
with $404,000 for the same period last year; net sales of the affiliate for the
three-month period ended December 31, 1994 of $85.2 million were 18% less than
the sales of the prior year three-month period of $103.4 million. This net
reduction is attributable to a lower volume of microprocessor sales which earn
a relatively low gross profit margin. The lower microprocessor sales and
increased operating expenses impacted current year profitability.
Notwithstanding the reduced sales level for the current three-month period, a
significant portion of the affiliate's sales during the quarter was
attributable to highly concentrated sales of certain microprocessors in large
quantities, the sales volume of which might not be sustainable in future
periods and the effect of which could result in a significant impact on net
income of the affiliate.
The effective combined tax rate for the current year three-month period was
41.5% of income before the Company's equity in its affiliate's earnings
compared with 41.9% a year ago; these effective tax rates include .7% for
deferred taxes on the unremitted earnings of the affiliate for 1993 and only a
nominal amount in 1994.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending December 31, 1994 of $6.1 million was $1.2 million
greater than the $4.9 million earned a year ago.
8
<PAGE> 9
Pioneer-Standard Electronics, Inc. owns 50% of the outstanding common stock of
Pioneer Technologies Group, Inc. The investment is accounted for by the equity
method in the Company's financial statements via the balance sheet caption of
"Investment in 50%-owned company" and via the statements of income caption of
"Equity in earnings of 50%-owned company".
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
December 31, 1994 March 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 9 $ 8
Accounts receivable - net 32,467 29,213
Merchandise inventory 52,224 60,690
Prepaid expenses 528 405
Deferred income taxes 2,136 2,077
Shareholder notes receivable 19 52
------- -------
Total current assets 87,383 92,445
Property and equipment, at cost 10,953 10,401
Accumulated depreciation 5,416 4,746
------- -------
Net 5,537 5,655
Shareholder notes receivable 231 231
Other assets 268 262
------- -------
$93,419 $98,593
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $25,802 $44,072
Accrued liabilities 4,953 4,895
------- -------
Total current liabilities 30,755 48,967
Long-term debt 32,006 20,698
Shareholders' equity
Common stock $.10 par value 10 10
Capital in excess of par value 90 90
Retained earnings 30,558 28,828
------- -------
Total shareholders' equity 30,658 28,928
------- -------
$93,419 $98,593
======= =======
</TABLE>
9
<PAGE> 10
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Quarter ended Nine months ended
December 31, December 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $85,238 $103,437 $271,113 $329,408
Costs and expenses:
Cost of goods sold 73,612 91,944 233,295 290,767
Selling and
administrative expense 11,038 9,819 33,322 29,961
------- ------- ------- -------
Operating profit 588 1,674 4,496 8,680
Interest expense 560 307 1,566 825
------- ------- ------- -------
Income before
income taxes 28 1,367 2,930 7,855
Provision for
income taxes 10 559 1,200 3,154
------- ------- ------- -------
Net income $ 18 $ 808 $ 1,730 $ 4,701
======= ======= ======= =======
Average shares outstanding 100,000 100,000 100,000 100,000
Earnings per share $.018 $8.08 $17.30 $47.01
Dividends per share --- --- --- ---
</TABLE>
10
<PAGE> 11
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Nine months ended
December 31,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,730 $ 4,701
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Items not affecting cash 1,045 834
Decrease (increase) in operating working capital (13,149) 6,782
Increase in other assets (6) (40)
------- -------
Total adjustments (12,110) 7,576
------- -------
Net cash provided by (used in)
operating activities (10,380) 12,277
Cash flows from investing activities:
Additions to property and equipment (927) (1,728)
------ -------
Net cash used in
investing activities (927) (1,728)
Cash flows from financing activities:
Increase (decrease) in long-term debt 11,308 (10,548)
------- -------
Net cash provided by (used in)
financing activities 11,308 (10,548)
------- -------
Net increase in cash 1 1
Cash at beginning of period 8 7
------- -------
Cash at end of period $ 9 $ 8
======= =======
</TABLE>
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
------ -----------
11 Calculation of Primary Earnings Per Share
27 Financial Data Schedule
(b) FORM 8-K There were no reports on Form 8-K filed during
the three-month period ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER-STANDARD ELECTRONICS, INC.
Date: February 9, 1995 /s/ Preston B. Heller, Jr.
------------------ ------------------------------------
Chairman of the Board and
Chief Executive Officer
Date: February 9, 1995 /s/ John V. Goodger
------------------ ------------------------------------
Vice President, Treasurer
and Assistant Secretary
12
<PAGE> 1
<TABLE>
Exhibit 11
CALCULATION OF PRIMARY EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
and common share equivalents
outstanding 15,262,621 15,150,532 15,252,844 15,084,822
Net income $6,130 $4,887 $17,744 $14,146
Earnings per share $.40 $.32 $1.16 $.94
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1994
<CASH> 14,581
<SECURITIES> 0
<RECEIVABLES> 118,331
<ALLOWANCES> 4,439
<INVENTORY> 131,405
<CURRENT-ASSETS> 267,050
<PP&E> 51,587
<DEPRECIATION> 23,000
<TOTAL-ASSETS> 316,319
<CURRENT-LIABILITIES> 138,510
<BONDS> 56,306
<COMMON> 6,667
0
0
<OTHER-SE> 112,798
<TOTAL-LIABILITY-AND-EQUITY> 316,319
<SALES> 590,688
<TOTAL-REVENUES> 590,688
<CGS> 479,508
<TOTAL-COSTS> 479,508
<OTHER-EXPENSES> 79,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,686
<INCOME-PRETAX> 29,832
<INCOME-TAX> 12,088
<INCOME-CONTINUING> 17,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,744
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 0
</TABLE>
